Leadership - All posts tagged Leadership

How do you profitably invest in the veggie farms, grass-fed beef producers and artisan goat cheese-makers that make up the burgeoning local food system? When Woody Tasch, in 2008, published Inquiries into the Nature of Slow Food: Investing as if Food, Farms and Fertility Mattered, and launched the nonprofit Slow Money to help guide the flow of capital into small and local food enterprises, he did not have a clue. But he captured the zeitgeist.

Five years later, 650 farmers, ranchers, local food entrepreneurs, food activists and investors met at the fourth Slow Money Gathering in Boulder in late April, trying to better understand the economics of financially viable local farms. As Penta reported in its December cover story, “The New Philanthropists,” figuring out how to profitably integrate local, bio-diverse farms into food delivery chains is consuming many fine minds, including Microsoft millionaire, Narendra Varma; it’s wise to be aware of what is going on in this corner of the food and agricutlural industries.

Michael Brownlee, co-founder of Localization Partners, LLC, a Slow Money affiliate based in Boulder, said at the conference the food localization effort in Colorado is no longer about a “preferential lifestyle,” but rather about an economic development strategy for an agricultural state. Sounds a bit grand, but Denver’s Mayor Michael Hancock recently announced the city has an official food localization goal of 20% by 2020. Brownlee says Slow Money will be a key part of Denver’s strategy.

You have a great nanny who originally entered your home as an au pair from Ireland, stayed on in the U.S. past what her visa permitted, and you fell into the habit of paying her cash, on which you pay zero taxes and insurance fees. It’s bothered you for some time, but after a couple of high profile folk—Meg Whitman and, most famously, Zoe Baird—have publicly and painfully had their career paths derailed for doing something similar, you have finally woken up to the risk lurking in your household.

Fact: You are in violation of your state’s labor department, the Internal Revenue Service, and Homeland Security, subject to thousands of dollars in fines and back taxes.

This scenario, in one form or another, is amazingly commonplace. “Most people don't bother to comply with the rules, because it's a lot of work and because it's expensive,” says Valerie Adelman, CFP, a high-net-worth financial and tax planner in New York City.

Putting an employee on the books can up an employer’s costs on her or him by between 10 percent and 40 percent, especially if the employer raises the salary to compensate for the nanny’s hit from federal, state and local taxes, says Cliff Greenhouse, president of the New York employment agency Pavilion Agency and the Nanny Authority. His agencies make about 1,000 placements a year among wealthy families in New York, Florida, California, Illinois and Michigan and internationally.

The current rage for philanthropy is in danger of turning into a Pyrrhic victory for charitable causes. It seems that every public relations or marketing pitch I get these days has a bit of me-too philanthropy tacked on. Earlier this year I received a pitch for the “World’s First Philanthropic Vacation Club”. Overpay for your hotel rooms and this room aggregator will be able to “donate $1 billion to charity every 10 years” – or so the press release claimed. This pitch was promptly followed by a request I write about Cold-EEZE’s campaign, “Catch A Cause, Not A Cold.” It totally put me off my lunch.

We are witnessing, in full battle mode, what the writer Paul Theroux calls, “the Virtue Industry.” Philanthropic causes are ever more frequently hijacked for corporate marketing purposes, much to the damage of the charity championed and the brands thoughtlessly believing they are “doing good.”

What they forget: Wealthy families are the best detectors of BS, bar none, by virtue of the fact they are pitched all day long. Nothing will turn them off a brand or company more than a fig leaf of charity trying to disguise a transparent sales pitch. What they are looking for is authenticity, both in the brands they consume and the causes they back. An insincere “charitable” effort, obviously meant to benefit the company more than the cause, can irreparably damage the non-profit and the brand alike.

With this in mind, Barron’s Penta and the Luxury Marketing Council convened earlier this week a world-class panel of smart folk at the DiMenna Center in New York. The theme of the night was, “Authentic Philanthropy: The New Age of Corporate Giving.” On the panel were Page Snow, chief philanthropic officer of Foundation Source; Danny Meyer, the chief executive officer of the Union Square Hospitality Group; and Jasmine Audemars, chairwoman of the luxury Swiss watch brand, Audemars Piguet.

A recent Boston Globe article examined the tax returns of fifty nonprofit foundations operated by professional athletes. Half of the organizations disbursed donations below the 25 to 35 cents per dollar raised that was deemed the “acceptable minimum” by nonprofit specialist, and the bad press from the Boston Globe article was deeply damaging to many athletes’ images. Among the many players singled out for public humiliation were the Red Sox’s Josh Beckett, the New England Patriots’ Deion Branch, and the Yankees’ Alex Rodriguez.

“A foundation started by New York Yankees third baseman Alex Rodriguez gave only 1 percent of proceeds to charity during its first year of operation in 2006,” wrote reporter Callum Borchers, “then stopped submitting mandatory financial reports to the IRS and was stripped of its tax-exempt status. Yet the group’s website still tells visitors the A-Rod Family Foundation is a nonprofit organization.”

Matt Stover, the retired NFL kicker and two-time Super Bowl Champion with the Giants and Ravens, claims he has the answer for his fellow charity-minded athletes similarly singled out for reputation-damaging ridicule.

In 2011, Stover launched, with two partners, the Players’ Philanthropy Fund (PPF). It’s a donor-advised fund, a popular vehicle that allows an individual to deposit funds into a pre-packaged and IRS-approved personal charitable account, the value of the securities or funds to be deducted from taxes at the date of giving, but dispersed to approved charities at the donor’s request and preferred time frame.

The twist here is that the PPF is specifically targeted at athletes. It

How do you make sure your family-owned business has the right leader for the times? The answer, apparently, is to develop multiple leaders in-waiting, with different strengths, so the family board has the right arrow in its quiver, precisely when needed.

So says Gautam Mukunda, an assistant professor in the Organizational Behavior Unit at Harvard Business School and the author of Indispensable: When Leaders Really Matter (Harvard Business Review Press, 2012).

In today’s world, the business environment can change very quickly. In contrast, cultivating a future leader takes time, and you don’t really know what the world is going to look like five years from now. “There are very few businesses where you can predict with any level of certainty what you will have to deal with five years down the road,” says Mukunda, whose book analyzes how and when individual leaders really can make a difference.

Mukunda says that’s why families should in particular study General Electric (GE) and why it is so good at cultivating leaders. No-one from outside GE is even considered for the top job, which makes the GE analogy with family businesses quite apt. GE spends 20 years tracking everybody within the company who might one day be CEO material, before picking five finalists, with one eventually selected for the job. “So somewhere in GE today is Jeff Immelt’s successor,” says Mukunda. “But what is even more amazing, is that somewhere within GE is the successor to Jeff Immelt’s successor –because they are probably already working at the company.”

Yet, unlike General Electric, which has more than 300,000 employees to pick from, family-owned businesses typically have only a handful of family members from which to choose, or, if the business is several generations old, maybe, if they are lucky, a couple of hundred or so. “And what are the odds that the person who is the best person for the situation also happens to be the descendant of the person who is in charge right now?” asks Mukunda.

Dressed in a burgundy-colored velvet suit, the 35 year-old Austrian, Maximilian J. Riedel, walks through his company’s showroom in search of the Bloomingdale’s buyer who has flown to Frankfurt, Germany, to see the latest designs offered by his family’s eponymous wine glass company. At the world’s largest consumer goods fair that takes place each year at Messe Frankfurt, the Riedel firm has constructed an elaborate if temporary stage to present its wine glasses and decanters to wholesale customers who have come from around the world to place orders for their retail stores.

In America, Riedel products are sold in the likes of Tiffany & Co., Macy’s and Williams-Sonoma. The Austrian’s firm’s crystal costs up to $160 a stem; if you don’t have some in your butler’s pantry already, it’s likely you have unwittingly sipped from a Riedel product, either at an oenophile’s house or while at your favorite Michelin-starred restaurant.

But this year the Frankfurt showroom isn’t just a stage for Riedel’s products, or for the glassware of its subsidiaries, Nachtmann and Spiegelau. It’s also a stage for the 35-year-old heir apparent. Riedel’s father, Georg, made the announcement in the Frankfurt fair that his son will be the 11th generation to serve at the helm of the family business as of July 1st.

Riedel’s father, Georg, the majority owner of the company that has been family-owned and operated since it was founded in 1756, proudly watches his son move from client to client. “I am very happy and proud as a father to say I have somebody who is extremely talented, is the right age, and is willing to join the family business,” the urbane 64-year old says. “There is no regret on my behalf and how it will work out. The future will tell.”

With aging baby boomers running family businesses increasingly at the end of their reign, succession planning is top of mind for many family businesses. According to a recent Accenture report, $30 trillion in assets will be passed from baby boomers to their heirs in the next 30 to 40 years in North America alone. A great piece of that pie will come from family businesses.

Alfred Peguero, a partner at the Private Company Services practice of PricewaterhouseCoopers, deals one-on-one with families on such tough-to-face “soft issues.” The essential question these families are asking: Do you prepare the next generation to take over the family business, or do you pick the management fruit from a non-family tree?

A survey released by PwC this week of 100 owners, leaders, and executives of family businesses in the U.S., suggests that only 52% of family businesses intend to pass both ownership and management of their business on to family members. Another 24% of the firms questioned plan to pass on corporate ownership, but not management positions, to the family’s next generation. Takes those two stats together, and it’s clear, as Peguero points out, “there’s going to be a big drive for top talent” to fill managerial spots in family businesses in the coming 5 to 10 years.

How do you become a leader in philanthropy? There’s no one set path, of course, but the Southeastern Council of Foundations, a network of over 360 foundations in 11 states, has started a unique program that aims to groom the next generation of philanthropic leaders.

Since 2000, the Hull Fellows program each year accepts about 20 young or new foundation staff and trustees from the SECF member foundations, like The Duke Endowment and The Patterson Foundation. The one year fellowship focuses on developing leadership skills while learning the history of philanthropy, emerging issues in the field, and practicing philanthropy in the context of the American South.

The Hull program emphasizes academic study of the philanthropic landscape, while also underscoring each student’s place within the field. The program curriculum changes slightly year to year, but recently the program has started off with a personal leadership assessment in the form of a Myers-Briggs personality test to help identify leadership strengths (and weaknesses) so the student can build on them throughout the year. Fellows are then, based on their profile, matched with a mentor, typically a foundation leader, who acts as a “sounding board” throughout the Fellows’ year long journey.

Many small business owners feel a moral obligation to step up their hiring and help bring down the nation’s unemployment rate, a new survey by U.S. Trust suggests.

According to the survey, 66% of business owners say they feel “empowered to make a difference by their ability to create opportunities for others.” In fact, creating jobs is their responsibility, say 72% of business owners. More still, 76%, feel an obligation to keep people employed even if that translates to lower profits. The survey polled 642 individuals with investible assets of at least $3 million.

Despite the sluggish economy, 55% of business owners have started a business, acquired one, and/or made “substantial investments” to expand their business since 2008. And despite well-publicized economic and regulatory concerns this year, just 55% of business owners cited those concerns as reasons for halting business growth. Fewer still said access to credit (28%) or availability of start-up funding (15%) were hindering growth.

Hurricane Sandy’s aftermath will certainly challenge the resources of the public and non-profit sector, but, for what’s it’s worth, the philanthropic sector was well on the mend before it hit, despite the nation’s continued economic weakness. That at least is the underlying message of the latest relevant study.

The 2012 Bank of America Study of High Net Worth Philanthropy, in partnership with the Center Philanthropy, questioned 700 rich folk with liquid assets of $1 million or more. The results released in this biennial study this week reflect philanthropic behavior among the wealthy in 2011.

Average giving as a percentage of household income remained at about 9% between 2009 and 2011. So, folk kept their commitments during the worst of the recession. Unfortunately, the recession meant the average dollar amount given per household declined 7%, from $56,621 to $52,770 (adjusted for inflation) during the same period.

But here’s the good news going forward: during the next three to five years, 76% of households plan to donate as much (52%) or more (24%) money as they have in the past. Only 9% plan to give less. Claire Costello, philanthropic practice executive for U.S. Trust, Bank of America Private Wealth Management, called it a heartening “morale boost to the non-profit sector.”

About Penta

Written with Barron’s wit and often contrarian perspective, Penta provides the affluent with advice on how to navigate the world of wealth management, how to make savvy acquisitions ranging from vintage watches to second homes, and how to smartly manage family dynamics.

Richard C. Morais, Penta’s editor, was Forbes magazine’s longest serving foreign correspondent, has won multiple Business Journalist Of The Year Awards, and is the author of two novels: The Hundred-Foot Journey and Buddhaland, Brooklyn. Robert Milburn is Penta’s reporter, both online and for the quarterly magazine. He reviews everything from family office regulations to obscure jazz recordings.